Saturday, February 06, 2010
2:22:36 PM EDT

Cosmetics, Industrial Goods & More

by
James Brown

My market bias is still bearish. Until we see the S&P 500 close above 1100 or the 1120 level I suspect the path of least resistance is going to be down. However, on a very short-term basis the market bounce on Friday looks like a bullish reversal pattern. Now technically this pattern needs to see confirmation first before it's a buy signal. I believe stocks will confirm the reversal but I'm only expecting a bounce toward 1100 and maybe the 50-dma (1111 on the S&P 500). As we near the 1100 area we'll start looking for possible shorts again. Of course everything could change if there is no bounce on Monday.

We are going to try and scalp some points on the bounce with some bullish plays. You'll want to use a tight stop loss and be prepared to exit quickly!

NEW BULLISH Plays

Estee Lauder - EL - close: 55.40 change: -0.44 stop: 53.49

Why We Like It:
EL is a relative strength play not an oversold bounce play. The stock has not sold off with the rest of the market. Instead shares are breaking out to new 52-week highs. Traders bought the dip at its rising 10-dma on Friday and recent resistance near $54.00 should be new support. I'm a little cautious about buying new highs so keep positions small. Our target is $59.50. Our time frame is three to four weeks. FYI: The Point & Figure chart is forecasting at $69 target.

Annotated chart:

Entry on February 06 at $55.40
Change since picked: + 0.00
Earnings Date 04/27/10 (unconfirmed)
Average Daily Volume: 2.5 million
Listed on February 06, 2009

Illionois Tool Works - ITW - close: 42.66 change: +0.13 stop: 41.75

Why We Like It:
ITW has seen a 16% correction from its January highs. The stock is oversold and due for a bounce. Shares are trying to find support near $42.00 and its rising 200-dma. Combined with Friday's late-day bounce in the market this looks like an aggressive entry point to buy the bounce with a tight stop under Friday's low. Our first target is $44.85. Our second target is the $46.45 level. This is an aggressive trade. Keep positions small.

Annotated chart:

Entry on February 06 at $42.66
Change since picked: + 0.00
Earnings Date 04/15/10 (unconfirmed)
Average Daily Volume: 3.6 million
Listed on February 06, 2009

Joy Global - JOYG - close: 44.54 change: +0.07 stop: 42.25

Why We Like It:
Europe debt default fears has sent the euro plunging and the dollar rising. This dollar strength has crushed the commodity sector and anything related to it. JOYG produces mining equipment and the stock has crashed with the mining stocks. Now it looks like JOYG could rebound with the sector.

The trend for JOYG is down but the stock is very oversold and ready to bounce. Traders bought the dip on Friday and shares closed back above their 200-dma. This is an aggressive trade. I'm suggesting small positions now with a tight stop under Friday's low. Our target to exit is $49.75. The $50.00 level should be resistance. We might consider switching directions and going short on a failed rally near $50.